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AT&T to buy rural phone co Centennial for $944 mln

Discussion in 'Wireless News' started by Blue4Life, Nov 7, 2008.

  1. Blue4Life

    Blue4Life Senior Member
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    AT&T to buy rural phone co Centennial for $944 mln

    NEW YORK (Reuters) – AT&T Inc (T.N) plans to buy rural phone company Centennial Communications Corp (CYCL.O) for $944 million in cash to expand its wireless network in Puerto Rico and other regions of the United States. The deal, which the two companies announced on Friday, comes amid a wave of mergers in the rural telecoms industry, which is struggling with slower wireless growth and declining home phone lines in a weak economy.

    AT&T agreed to pay Centennial shareholders $8.50 per share, more than double the company's closing price of $3.84 on the Nasdaq on Friday. A year ago, Centennial was trading at around $10. Shares of Centennial jumped to $7.85 in after-hours trading. AT&T shares were unchanged from their New York Stock Exchange close of $27. "This is one of the few rural wireless assets left. Perhaps it was inevitable," said Michael Nelson, a wireless analyst at Stanford Group. "I'm surprised to see a deal in this economic climate. But on the other hand, AT&T is using cash on hand and taking advantage of the significant decline in asset prices."

    Centennial has 1.1 million wireless subscribers, of which about 40 percent are in Puerto Rico, where it has a market penetration of about 11 percent. It also has about 596,700 access lines. "The transaction will enhance AT&T's wireless coverage for customers in largely rural areas of the Midwest and Southeast United States and in Puerto Rico and the U.S. Virgin Islands," AT&T said in a statement. AT&T, which has nearly 75 million wireless subscribers, said it expects minimal dilution to earnings and cashflow from integration costs in the first year after closing. It aims to obtain approval for the deal from Centennial shareholders and regulators by the second quarter of 2009. The companies said Welsh, Carson, Anderson & Stowe, Centennial's largest stockholder, has agreed to vote in support of this transaction.

    NEED FOR CONSOLIDATION
    Analysts have said that rural phone companies need to consolidate to cut costs, as more consumers cancel home phones to go completely wireless or switch to all-in-one phone, television and Internet packages offered by cable companies or national phone companies. Verizon Communications Inc (VZ.N) is buying rural wireless service provider Alltel Corp for $28.1 billion, which will help it overtake AT&T as the largest U.S. wireless service provider. CenturyTel Inc (CTL.N) announced a deal last month to buy rival rural phone company Embarq Corp (EQ.N) for $5.8 billion in stock. "The big continue to get bigger," Nelson said. "It's becoming increasingly difficult for the smaller carriers to compete against the large national carriers." Patrick Comack, analyst at Zachary Investment Research, agreed. "You're going to have smaller companies capitulating in this market," he said, adding, "The telecoms industry is way too competitive. The penetration has peaked. In wireless, it's really a market share war. So you see Sprint (S.N) and T-Mobile suffering, and AT&T and Verizon winning here."

    Including debt, the deal puts an enterprise value on Centennial of $2.8 billion. It and AT&T already have a roaming partnership, where AT&T customers could roam on Centennial's network in areas where AT&T did not have coverage. An AT&T spokesman said there was some overlap in their markets, primarily in the southeastern United States and Puerto Rico, but there was "robust competition" in these areas. In the Midwest, he said Centennial's network primarily covered rural areas and complemented AT&T's network. "I don't think it's the last of AT&T's acquisitions. Nor Verizon's," said Comack. "They're going to use their mass to do tuck-in acquisitions like this." Barclays Capital and Evercore were joint financial advisers to Centennial Communications in the transaction.
    (Additional reporting by Ritsuko Ando in New York and John Tilak in Bangalore; Editing by Bernard Orr)
     
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  2. M in LA

    M in LA Mobile 28 Years Plus
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    Another small carrier bites the dust...Apparently Blue is still hungry.
     
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  3. TWX

    TWX Mobile Enthusiast
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    Lol, when I saw the title of the thread I thought about the song "another one bites the dust...". But I bet the Verizon/Alltel merger was a propellant for this buyout. They are always in constant battle.
     
  4. Yankees368

    Yankees368 Compulsive Signal Checker
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    Yeesh, another carrier merger here in Lansing, MI.

    Alltel becoming Verizon, Centennial becoming AT&T, MetroPCS becoming introduced.
     
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  5. cellular_freak

    cellular_freak Senior Member
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    LOL. That's funny. That's what's happening up here too. Minus the whole Centennial thing, but they are close by. I was actually hoping this would happen for a while now. Centennial offers GSM service in many counties and towns in Michigan that AT&T and Dobson never reached. With this acquisition, AT&T will cover the entire state of Michigan with 850 MHz coverage except along the Grand Rapids-Lansing-Saginaw area corridor. It doesn't matter though cuz they have those areas covered pretty well with PCS coverage.

    We may also be seeing another merger in Michigan soon. One between Sprint and iPCS.
     
  6. Yankees368

    Yankees368 Compulsive Signal Checker
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    Oy, iPCS. Well see if that happens.
     
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  7. larry

    larry Sprint loyalist and former mod
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    Wonderful. Yet another competitor is gone.
     
  8. COtech

    COtech Bronze Senior Member
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    That gets the southwestern Mississippi, and north and central Louisiana parts of Centennial adjoining the AT&T Mobility cellular near me, south of Memphis. These were among the closer places I could go to (attempt to) see roaming displays on my handset, and an MNC-MMC other than 310-410 (310-030).

    There was already PCS coverage along I-20 and US highways, but get deeper out into the counties and parishes, and you roamed onto Centennial. It will make AT&T more competitive with Alltel (VZW) in both states, and RCC Unicom (VZW) in Mississippi.

    COtech
     
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  9. bobolito

    bobolito Diamond Senior Member
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    So how many small regional carriers are left? How soon do you think the rest will be acquired by either of the big 4? I wish Sprint and T-Mobile would hurry and buy some of those regionals before AT&T and Verizon buy them all. This is just a matter of time before they're all gone.
     
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  10. cellular_freak

    cellular_freak Senior Member
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    There's a few small ones left. Specifically, here in the Midwest, there's carriers like Cellcom, Illinois Valley Cellular, and Thumb Cellular that are likely to be bought out by Verizon eventually. There's also small GSM carriers that AT&T will likely acquire, like Einstein PCS, Kankakee Cellular, and Cellular Properties. Here's a link to a site that shows the A and B side cellular carriers for the nation and regions. You can do the math as to the recent mergers and such:The Cellular/PCS License Resource
     
  11. larry

    larry Sprint loyalist and former mod
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    The only thing Sprint might do is buy IPCS but that's about it. Sprint and T-Mobile don't have the money to do things like that.

    Verizon and AT&T are just going to continue to get bigger and bigger with their money and I think we have good reason to be concerned about that.
     
  12. cheddar

    cheddar Senior Member
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    And if the FCC can finagle it they'll approve sprint and tmobile getting bought. It's easier to regulate a couple big companies than lots of small ones.
     
  13. bobolito

    bobolito Diamond Senior Member
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    Right, Sprint is in no condition to buy anyone right now for obvious reasons, and T-Mobile is in the middle of an expensive 3G upgrade, plus they just bought Suncom. However, I would say they are a bit better positioned than Sprint to acquire a small carrier at this time. Hopefully they can grab some of what's left.
     
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  14. Nextel32708

    Nextel32708 Junior Member
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    Logical mergers/buyouts for T-Mobile USA:

    iWireless (already T-Mobile affiliate) - central/eastern Iowa
    Long Lines Wireless - western Iowa, and southeastern South Dakota
    Einstein PCS (owned by Native Americans, not sure what tribe up in WI) - Wisconsin (statewide)
    Chinook Wireless - Montana (statewide)

    Glad they go Suncom - I realise the above operators are not nearly as valuable as Suncom is to T-Mobile - but still!

    Anyone think any of this could happen? Einstein, to me, seems to be a logical fit. As does iWireless - maybe not Long Lines (but who knows). And the reason I put Chinook in there is that I would rather see T-Mobile buy them up than at&t.

    and yes... there are many small GSM operations still left: GSM Roaming - United States
     
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  15. larry

    larry Sprint loyalist and former mod
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    The big question is who will wind up with US Cellular?
     
  16. COtech

    COtech Bronze Senior Member
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    Another question: what overlapping cellular coverage areas (including part of Louisianna) might AT&T Mobility have to sell, and who would be interested? VZW is just getting into LA big, with the purchase of AllTel.

    COtech
     
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  17. bigsnake49

    bigsnake49 New Member

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    Here's my dream:

    US Cellular picks up the majority of VZW divestitures. Then merges with Leap/MetroPCS to form a pretty nice nationwide network to compete with the bigboys. The resulting company adopts the unlimited model and starts eating at the bigboys forcing them to drop their prices. Everybody wins.
     
  18. larry

    larry Sprint loyalist and former mod
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    Yeah that would be great except then Verizon or someone else would swallow them up and the FCC would just let it happen like they always do. :eek:
     
  19. JFB

    JFB Gold Senior Member
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  20. QLR

    QLR RIP Note!
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    Perhaps Cellular South would be interested as they have properties in MS, AL, FL, and TN... if AT&T has to sell any overlap? Maybe that's a stretch since CSouth is a CDMA company.
     
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  21. bobolito

    bobolito Diamond Senior Member
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    US Cellular picks up the majority of VZW divestitures. Then merges with Leap/MetroPCS to form a pretty nice nationwide network ...... and then Verizon will come and buy it all out! :p
     
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  22. larry

    larry Sprint loyalist and former mod
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    And the Feds will allow it to happen yet again! :eek:
     
  23. bobolito

    bobolito Diamond Senior Member
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    Yeah... but with the Dems now in power there surely be more scrutiny.
     
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  24. larry

    larry Sprint loyalist and former mod
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    Haven't the Dems been in power for 2 years? ;)
     
  25. cellular_freak

    cellular_freak Senior Member
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    Yes, but I believe that the GOP has control of the FCC. :D
     
  26. spleck

    spleck Tool
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    The problem is justification for tying up all that capital to buy a company that you may already have a good roaming deal with. VZW and AT&T do it because they are large enough to incorporate other companies and reduce their overhead to make more money. T-Mobile is not large enough to absorb those other carriers without incurring extra costs. I bet in many cases they could break even on acquiring those companies, but they only have so much money!

    That being said, depressed market values may make purchases more likely once there are signs of economic recovery. AT&T must feel the market won't get much worse, and that its the right time to buy Centennial.
     
  27. Shizam76

    Shizam76 Shizam! Babyyyyy!
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    Doesn't TMobile have roaming agreements with Centennial? If so...those will not be renewed I bet once at&t gets a hold of it.
     
  28. spleck

    spleck Tool
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    I'm sure if T-Mobile needs those roaming agreements, they complained to the FCC. Many of these acquisitions have required the buyers to maintain the roaming agreements for x number of years.
     

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